| This is clearly a trend: higher rates. As rates for home-purchase loans rose for the ninth straight week, the industry continues to believe that the market is still strong enough to weather the increased costs.
According to mortgage finance provider Freddie Mac, the 30-year fixed-rate mortgage averaged 4.32% in the latest reporting week, which is up two basis points from the prior week. It is only since November that rates have surged 85 basis points. The 15-year fixed-rate mortgage averaged 3.55% in the latest reporting period, which is up from 3.52%. These higher rates are also reflected in the increase of affordability, which is sure to impact first-time buyers. With the present mortgage rate hikes, buyers will clearly look for ways to make a purchase work for them. Trying to time the purchase of a home based upon rates may not be the best strategy to employ, considering that a 20-basis-point jump in rates on a $200,000 home would add just $18 to the monthly mortgage cost. More bad news for homebuyers comes in the form of a slowdown in new construction from builders recently. This will be covered in part two of this article. In some cases, first-time homebuyers may reconsider where they want to buy that first piece of real estate. There are also other scenarios in which the buyers may look to purchase a two-family home in order to help with the mortgage payments. Still higher trends in mortgages, affordability and home prices give the sense that the real estate market is rising a wave instead of sitting on a bubble, as many experienced back in 2006-08. |